Key Compliance Requirements for Companies Limited by Guarantee in Singapore

When you're planning a Singapore company setup, it's important to choose the right structure for your goals. While most entrepreneurs look toward private limited companies, there's another structure often overlooked: the company limited by guarantee. Particularly useful for non-profit initiatives, this structure offers distinct benefits, but it also comes with a unique set of compliance requirements.

In this blog, we’ll break down the essentials you need to know about companies limited by guarantee in Singapore — what they are, when to consider them, and the key compliance obligations you’ll need to meet.

What is a Company Limited by Guarantee?

A company limited by guarantee (CLG) in Singapore is a type of public company used primarily for non-commercial purposes. Unlike companies with shareholders, these entities have members who guarantee a fixed amount (usually a nominal sum like $1 or $10) to cover liabilities in case the company is wound up.

These companies do not distribute profits to members. Instead, any surplus income is reinvested to support the company’s objectives, which are usually charitable, educational, religious, or focused on public benefit.

For many global entrepreneurs interested in establishing philanthropic arms or social enterprises, setting up a public company limited by guarantee in Singapore is a well-recognized and compliant way to do so.

Why Choose a Company Limited by Guarantee?

Choosing a CLG structure aligns well with goals that focus on advocacy, community engagement, education, and social good. Here are some reasons entrepreneurs and organizations consider this setup:

• Reputation and Credibility: The structure offers legal recognition as a non-profit, enhancing credibility with donors, partners, and regulators.

• Limited Liability: Members' liabilities are limited to their guarantees, ensuring personal assets are protected.

• Tax Exemption: Companies limited by guarantee in Singapore that are registered as charities can qualify for tax exemptions.

• Access to Funding: CLGs may be eligible for grants, sponsorships, and public funding unavailable to private businesses.

While the structure is compelling, it comes with strict governance and compliance expectations. Let’s walk through the key requirements.

Key Compliance Requirements for Companies Limited by Guarantee in Singapore

1. Incorporation and Constitution

Like any Singapore company incorporation, forming a CLG requires registration with the Accounting and Corporate Regulatory Authority (ACRA). However, the constitution (previously known as Memorandum and Articles of Association) for a CLG must clearly define:

• The non-profit objectives of the company.

• The amount each member agrees to contribute if the company is wound up.

• Clauses restricting profit distribution.

For any new Singapore company setup involving a CLG, you’ll want legal advice to draft a constitution that aligns with both your mission and ACRA’s expectations.

2. Minimum Number of Directors and Members

A CLG must have:

• At least two directors who are natural persons.

• A minimum of one member, though most CLGs typically have more.

At least one director must be ordinarily resident in Singapore. This is to ensure accountability and local oversight.

3. No Share Capital

Unlike private companies, CLGs do not issue shares. Instead, they operate based on member guarantees and cannot pay dividends. This is why their activities must be non-commercial, and any profits must be reinvested.

4. Appointment of Company Secretary

A CLG must appoint a qualified company secretary within six months of incorporation. The secretary ensures that all statutory obligations are met, including regulatory filings and maintaining company records.

5. Registered Office Address

Just like other business entities, CLGs must have a registered office in Singapore. This address is used for official correspondence from ACRA and other authorities.

6. Annual General Meeting (AGM)

A public company limited by guarantee in Singapore must hold an Annual General Meeting (AGM) every calendar year. The first AGM must be held within 18 months of incorporation.

During the AGM, directors present audited financial statements and provide updates on the company’s performance. It's also an opportunity for members to ask questions and hold leadership accountable.

7. Filing of Annual Returns

CLGs are required to file annual returns with ACRA within seven months of their financial year-end. The returns include:

• Audited financial statements

• Details of officers and members

• Key company information

This filing is essential to stay in good standing with regulators and avoid penalties.

8. Audit Requirements

Unless exempted, companies limited by guarantee in Singapore must be audited annually. Audit exemption applies only if:

• Total annual revenue is less than SGD 500,000.

• The company is not a charity or public interest entity.

If your CLG is a registered charity, you must follow the guidelines set by the Commissioner of Charities for undergoing audits in Singapore.

9. Registration as a Charity (Optional but Beneficial)

If your CLG’s objectives are charitable, consider registering it as a charity with the Charities Unit under the Ministry of Culture, Community and Youth. This provides additional benefits:

• Tax exemption on income

• Eligibility for government grants

• Enhanced public trust

To qualify, the company must serve the public benefit and meet governance and transparency standards.

10. Corporate Governance

Strong governance is not just encouraged; it's expected. CLGs must operate transparently and accountably. This includes:

• Maintaining proper records

• Conducting regular board meetings

• Disclosing conflicts of interest

• Ensuring all activities align with the constitution

For CLGs that are also charities, compliance with the Code of Governance for Charities and Institutions of a Public Character (IPCs) is essential.

Challenges and Considerations

Setting up and running a CLG in Singapore requires dedication to compliance and governance. You must be prepared to meet ongoing obligations, from financial reporting to board accountability.

It's also important to consider the sustainability of your funding sources. Since CLGs can’t distribute profits, long-term financial planning is critical.

Finally, make sure that your chosen company name does not suggest commercial activity. ACRA may reject names that imply profit-making or mislead the public.

Conclusion

Companies limited by guarantee in Singapore offer a legally sound structure for non-profit activities, providing limited liability, credibility, and potential tax benefits. But they also come with distinct compliance obligations that cannot be overlooked.

If you're exploring Singapore company incorporation for a mission-driven venture, a CLG may be the perfect fit. Just be sure to stay informed, stay compliant, and surround yourself with advisors who understand the nuances of this corporate form.

FAQs

1. Can foreign entrepreneurs set up a company limited by guarantee in Singapore?
Yes, foreigners can be involved in a CLG, but at least one director must ordinarily reside in Singapore. It’s common to engage local corporate service providers to assist with the process.

2. Do all companies limited by guarantee in Singapore need to be registered as charities?
No, registration as a charity is optional. However, if you seek tax exemptions and public funding, becoming a registered charity offers added benefits.

3. How long does it take to incorporate a CLG in Singapore?
Typically, the Singapore company incorporation process for a CLG takes 5 to 10 working days, depending on the complexity of the constitution and whether name approval is needed.